A Period of time of Adjustment
Oops! That large hissing seem is the gaming balloon that had been increasing above the many years, slowly and gradually shedding air. But, it has not been a tide that lowered all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed robust development in 2008.
Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five percent drop in gaming revenues for 2008, creating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a acquire of virtually $one billion in 2008, thus bringing the Professional sector marketplace decline to $1.8 billion, or 6.seven %. Nevada was the largest loser in 2008, dropping almost $one.3 billion, more than 50 % of which stemmed from the Las Vegas Strip segment.
For the most component, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it really nosedived. Using the crest of 12 months more than yr market place development throughout the nation and the availability of enough credit history and equity funds, new construction and enlargement proliferated in recent a long time. Today, confronted with the realities of declining, or at greatest stagnant demand, numerous of these assignments are now regarded more than-leveraged and/or more than-sized. As a end result numerous gaming firms are trying to renegotiate their debt – created far more challenging by reduced valuations – even though also paring down operational charges. The latter has turn out to be a really problematic conundrum when working with the competitors, specially in individuals jurisdictions that are now vying for market shares with new emerging on line casino projects in neighboring places. A topic we examine more totally in the Point out by Condition analysis part of this publication.
As a end result of these circumstances the gaming market landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each week.
“How long will these financial problems persist, and are we at the bottom but?” are inquiries no one appears to be answering yet. What is distinct nonetheless is that most gaming jurisdictions will have to learn how to deal with a smaller sized pie.
This investigation contains only gaming revenues of licensed casinos and pari-mutuel retailers that offer on line casino video games, and not Indian gaming functions, card rooms, or tiny non-casino type slot areas. The whole report, including profits tables is obtainable on our world wide web webpage.
A key aspect that looks to have arisen from the ashes of this current pattern is that many casino projects ended up just way too large to assist on their own. The input, in terms of expense pounds, was not proportional to the output, in phrases of web earnings right after credit card debt support, in comparison to formerly reached outcomes. More and/or even bigger is not constantly much better. Looking at the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more thorough features in many other jurisdictions. The flaw in this method even so is that the fees associated with widening industry penetration and occasioned-use, are considerably higher than individuals incurred to draw in the foundation market.
As daytripper marketplaces grow to be much more competitive, on line casino venues will have to rely far more and far more on their in-property resort patrons, and measurement their qualities (and expectations) appropriately. Even though Steve Wynn began a main development in making up-market mega-places, there simply was not ample demand from customers on the Strip to warrant the numerous other related assignments that followed that aimed at the same niche.
The trick is to strike a happy medium in undertaking configurations which of course call for less of a ‘seat-of-pants’ strategy, and one particular that is more analyzed. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Even though there are no revealed thorough info of American Indian gaming revenues, anecdotal evidence appears to propose that this section has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about 7 %, or nearly $114 million, much more than doubling the 3.five percent drop from the year prior to. This market place is apparently nevertheless reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming studies that contributions dependent on a gaming earnings system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier yr reducing .8 per cent in the initial quarter, seven.5 percent in the second quarter, nine.5 p.c in the third quarter, and 16.1 percent in the fourth quarter.
Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that while calendar calendar year 2008 confirmed an virtually two per cent growth price in gaming revenues, there was an 8.seven % drop in the 3rd quarter and an practically ten % decrease in the fourth quarter of 2008, in comparison with 2007. Gaming earnings trends at close by Niagara Falls, Ontario ended up down one.five% in 2008 in comparison with 2007.
It’s been a blended-bag for condition lotteries across the place. The North American Association of Point out & Provincial Lotteries reviews that U.S. lotteries created a total of $sixty.6 billion in revenue in fiscal 2008, up about three per cent from the prior yr yet some jurisdictions reported decreases, most notably California, which confirmed an 8 percent drop. Inasmuch as some of these states are on different fiscal calendar year ends, it would seem to be that the info does not reflect the influence of 3rd and/or fourth quarter final results.
According to info presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven per cent to $thirteen.7 billion in 2008, as opposed to $14.seven billion in 2007.
Prepared & Proposed New Expansions
As formerly mentioned, it has been new gaming jurisdictions that have spawned considerably of the growth in annual on line casino/racino revenues over the a long time, and their impact is apt to keep on into the near foreseeable future.
Miami Dade voters authorized a ballot situation that permits each and every of 3 pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Canine Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has yet to declared its strategies. There are many other proposals getting deemed that would even more expand on line casino development throughout the point out.
The point out ultimately obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open up until finally 2010. There has also been some dialogue about allowing an boost in for each area gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.
The state’s expanded lottery system that allows for the growth of four on line casino gaming zones and slots at present horse and dog tracks appears mired, as only one particular facility is presently below building, even though 3 other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so close to the point out line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk video games, alongside with a next period due to open in 2011 with 875 slots and twenty desk online games. The condition has extended the application method for the other 3 zones till April, 2009.
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as numerous as eight slot parlors and racinos appears to be again on the entrance-burner, but probably not fixed for the duration of the current legislative session.
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest currently being the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new hotels incorporate two factors of the City Center project, and the Fountainebleau.
Pinnacle Entertainment’s new casino advancement initiatives in Baton Rouge and Lake Charles, while delayed, are noted to even now be on-keep track of for opening this calendar year and/or early 2010.
There is a bill under consideration that could far more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would take away the restriction that slots be located in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional residents to allow slots, may possibly be thinking about shifting to a much more hospitable town.
A referendum was accredited in November, 2008 that makes it possible for for the improvement of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot though it is not as powerful as the point out experienced predicted.
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into numerous financing concerns and even though the resort part is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back fairly, is still on keep track of to open up this year.
Massachusetts, a sleeping-giant in conditions of industry potential, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political help. A recent research concluded by Dartmouth University estimates that Massachusetts resident put in more than $920 million previous yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an selection to create casinos, nevertheless the subject is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its options.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by not too long ago agreeing to carry on augmenting purses with an additional tax. The governor even so, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot equipment especially at the Meadowlands. (See The Nor’easter Squeeze segment)
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would last but not least be produced, the winning bidder indicated an lack of ability to make the required $370 million charge, citing the current lending local climate, and throwing the project back again into the lap of the governor. Despite the fact that the market demand from customers in the spot could be considered quite sturdy, the prospect of further opposition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially thinking about that marginally considerably less than thirty% of the web acquire is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort intricate are getting reconsidered maybe owing to both the probable opening of at least 1 or maybe two racino functions in the NY metro location, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
However one more gaming proposal is currently being put forth in Ohio, soon after very last year’s variation was turned down by the voters. This program phone calls for one particular casino each and every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment essential of $250 million, as well as an preliminary licensing price of $50 million, and a 33 percent tax on gaming earnings.
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot services nonetheless wallow in a political mire, but are anticipated to commence design this calendar year.
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate three hundred online games, 140 rooms and a broad selection of amenities.
Legislators are proposing a voter referendum that would amend the state structure to let on line casino gambling in specified regions, as well as permit gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition authorities has proffered the notion of allowing the resort to provide on line casino game titles, but this energy is in also early a phase to have any traction 1 way or an additional.
A recent Supreme Courtroom ruling that restricts the getting of lands into believe in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming projects across the region. In addition, there had been eleven Indian casino initiatives rejected by the DOI very last yr due to the fact of its new rule that casinos should be in close proximity to adequate to a reservation that tribal associates can operate at them. It has been advised that the new Obama administration may possibly be a lot more sympathetic to the growth of Indian gaming tasks, but this issue has nevertheless to be dealt with.
In the meantime, there are other Class III tasks in the various stages of growth. The Seneca on line casino undertaking in Buffalo, NY, even though working a little short term facility, has delayed an presently below design everlasting facility till the market rebounds. They have also expressed an fascination in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could effect their strategies for bigger initiatives. There are new Indian gaming tasks established to open in Michigan and Oklahoma this yr, and others are in the preparing stage. Texas might permit the reopening of Indian gaming facilities and allow other location and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming revenue in Atlantic City has declined 7.6 p.c, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding itself in an extreme comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been positioned in Atlantic Town, exactly where it seemed as if it may well in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly and gradually nonetheless its industry share was becoming encroached on, very first by the advancement of a massive Class III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening about Atlantic City’s potential prospective customers. It’s reliance on day-trippers lulled it into a bogus perception of security, and it now finds itself possessing to redefine its mission statement to “spot resort.”
The only issue with this technique however is that it is sick-geared up to pull it off. For all intents and needs, Atlantic Town is under-roomed and/or in excess of-gamed. There is just not adequate working day-tripper market to go around, and their efficient buying and selling region is tightening, as the peripheral populations northward now/will have far more all set access to a widened offer in New York (Yonkers, and soon at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only real competitive positive aspects are its hotel ability and the availability of desk games, though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In order to sufficiently compete as a destination resort the city demands to produce added guest rooms and not automatically gaming ability. By comparison, the Las Vegas Strip properties – true gaming locations, in that they do not have significantly of a working day-excursion market, except for the ‘locals’ – have an average of .87 gaming positions for each visitor area whilst Atlantic City’s typical is 2.74 positions per visitor space.
It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, have been the least impacted by the most current downturn. The Borgata seasoned a gaming profits drop of 1.six p.c, although Harrah’s Marina documented a 4.9 p.c boost in comparison to 2007. In addition, the hardest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, like the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.
With a constant increase in gaming revenues by means of 2006, the town seemed key for further growth, which precipitated preparing for four new resort projects, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion project remains an iron skeleton, Pinnacle Leisure has introduced it may possibly seek to sell its razed Sands web site, MGM Mirage has shelved its on line casino plans, and Penn Nationwide appears to have stopped its pursuit of the Bader Field airport site.